Health insurer Aetna's 2Q profit falls 15 percent

Health insurer Aetna's 2Q profit falls 15 percent
Aetna Inc.'s second-quarter net income tumbled almost 15 percent compared with last year when slower-than-expected growth in health care use helped earnings. But the health insurer's latest results still beat analyst expectations, and it raised its 2012 earnings forecast.

The increase, announced Tuesday, comes a day after competitor Humana Inc. joined another insurer, WellPoint Inc., in cutting its 2012 earnings forecast after reporting second quarter results. Those insurers pointed in part to concern over rising medical costs.

Health insurers got a big assist last year from health care use that grew slower than they expected when they set their premiums. Aetna said Tuesday medical costs — which are affected by use and price increases for care — will rise at a faster clip in 2012 than they did last year, but they are still within the range the insurer expected and below growth rates seen before the recession.

Industry observers say people tend to reign in their health care expenses following a recession.

The Hartford, Conn., company said Tuesday that it now expects 2012 adjusted earnings, which exclude one-time items, to range between $5 and $5.10 per share. That's up from its previous forecast of $5 per share. Analysts surveyed by FactSet expect, on average, earnings of $5.04 per share.

In the second quarter, Aetna's net income fell to $457.6 million, or $1.32 per share. That's down from $536.7 million, or $1.39 per share, a year ago. Adjusted earnings, which exclude one-time items, were $1.31 per share. That topped the $1.25 per share that analysts expected.

Revenue rose 6 percent to $8.84 billion, also above analyst expectations of $8.75 billion.

Aetna's performance in last year's quarter was helped by a $188 million, pretax gain recorded because claims leftover from previous quarters came in lower than expected. That allowed the insurer to release money it had held in reserve. In the latest quarter, Aetna saw a smaller, $38 million gain due to leftover claims.

Excluding the after-tax impact of these gains, the insurer's earnings climbed 7 percent.

Aetna said health care costs, or the amount it paid in medical claims, rose 10 percent from to $5.91 billion.

Medical membership climbed less than 1 percent to 18 million people compared to the first quarter.

Aetna is the third-largest commercial health insurer based on both enrollment and revenue, trailing WellPoint and UnitedHealth. Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage.

Aetna shares climbed 7 cents to $37.21 Tuesday morning, while broader trading indexes fell slightly.